Critical Contrast: U.S. Bancorp (USB) and Deutsche Bank (DB)

U.S. Bancorp (NYSE: USB) and Deutsche Bank (NYSE:DB) are both large-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their risk, valuation, earnings, profitability, analyst recommendations, dividends and institutional ownership.

Insider and Institutional Ownership

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74.2% of U.S. Bancorp shares are held by institutional investors. Comparatively, 25.0% of Deutsche Bank shares are held by institutional investors. 0.4% of U.S. Bancorp shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares U.S. Bancorp and Deutsche Bank’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
U.S. Bancorp 25.91% 13.89% 1.32%
Deutsche Bank -2.34% -1.28% -0.06%

Earnings and Valuation

This table compares U.S. Bancorp and Deutsche Bank’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
U.S. Bancorp $24.00 billion 3.39 $6.22 billion $3.52 13.99
Deutsche Bank $43.11 billion 0.66 -$1.55 billion ($0.50) -27.50

U.S. Bancorp has higher earnings, but lower revenue than Deutsche Bank. Deutsche Bank is trading at a lower price-to-earnings ratio than U.S. Bancorp, indicating that it is currently the more affordable of the two stocks.

Dividends

U.S. Bancorp pays an annual dividend of $1.20 per share and has a dividend yield of 2.4%. Deutsche Bank pays an annual dividend of $0.21 per share and has a dividend yield of 1.5%. U.S. Bancorp pays out 34.1% of its earnings in the form of a dividend. Deutsche Bank pays out -42.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. U.S. Bancorp has raised its dividend for 7 consecutive years. U.S. Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

U.S. Bancorp has a beta of 0.89, indicating that its stock price is 11% less volatile than the S&P 500. Comparatively, Deutsche Bank has a beta of 1.3, indicating that its stock price is 30% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for U.S. Bancorp and Deutsche Bank, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
U.S. Bancorp 3 8 6 0 2.18
Deutsche Bank 3 6 1 0 1.80

U.S. Bancorp presently has a consensus target price of $58.22, indicating a potential upside of 18.21%. Deutsche Bank has a consensus target price of $18.03, indicating a potential upside of 31.13%. Given Deutsche Bank’s higher possible upside, analysts clearly believe Deutsche Bank is more favorable than U.S. Bancorp.

Summary

U.S. Bancorp beats Deutsche Bank on 13 of the 17 factors compared between the two stocks.

About U.S. Bancorp

U.S. Bancorp is a multi-state financial services holding company. The Company provides a full range of financial services, including lending and depository services, cash management, capital markets, and trust and investment management services. It also engages in credit card services, merchant and automated teller machine (ATM) processing, mortgage banking, insurance, brokerage and leasing. The Company’s banking subsidiary, U.S. Bank National Association, is engaged in the general banking business, principally in domestic markets. U.S. Bank National Association provides a range of products and services to individuals, businesses, institutional organizations, governmental entities and other financial institutions. As of December 31, 2016, the Company’s loan portfolio was $273.2 billion. As of December 31, 2016, its investment securities amounted to $109.3 billion. As of December 31, 2016, the Company’s deposits amounted to $334,590 billion.

About Deutsche Bank

Deutsche Bank AG is a bank and holding company for its subsidiaries. The Company offers a range of investment, financial and related products and services to private individuals, corporate entities and institutional clients. It operates through six divisions: Global Markets, which offers financial products, including trading and hedging services to institutions and corporate clients; Corporate & Investment Banking, which brings together its commercial banking, corporate finance and transaction banking capability; Private, Wealth and Commercial Clients, which combines its capability in private and commercial banking, as well as in wealth management solutions; Deutsche Asset Management, whose investment capabilities span both active and passive strategies and an array of asset classes, including equities, fixed income, real estate and sustainable investments; Postbank, which is a German financial service provider for retail, business and corporate clients, and Non-Core Operations Unit.

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